Table A of the Companies Act 1985 allowed for the chairman at a general meeting to have a casting vote in the event of an equality of votes on either a show of hands or a poll. This provision was removed by the Companies Act 2006 but was re-introduced for companies incorporated before 1 October 2007 who already had such a provision in their articles of association (articles).
There has been some discussion over how the changes under the Companies Act 2006 will operate given the chairman's casting vote appears to have been removed.
What are the rules?
Companies incorporated before 1 October 2007
Companies incorporated prior to 1 October 2007 with existing chairman's casting vote provisions in their articles can take advantage of the saving provisions. Those without an exisiting chairman's casting vote provision cannot now amend their articles to include such a provision.
Companies incorporated on or after 1 October 2007
As a general rule, companies incorporated on or after 1 October 2007 cannot be incorporated with a chairman's casting vote provision in their articles. However, for companies incorporated after 1 October 2007 where deadlock provisions are required, the articles can include specific provisions for dealing with a deadlock situation.
How to deal with deadlock situations
If the chairman is a member of the company in his own right, then it would be possible to provide that the chairman has the casting vote so long as he retains a share. It should be noted that any amendment to such clauses relating to the chairman's casting vote will not constitute a variation of class rights.
The Companies Act 2006 is silent however on how deadlock situations could be remedied where the chairman of a general meeting is not a member of the company. It is therefore suggested that some wording dealing with weighted voting rights of shareholders is incorporated into private company articles, where deemed appropriate.
What should companies do?
- UK registered companies should review their articles to check whether they provide the chairman the right to exercise a casting vote at general meetings.
- Companies without a chairman's casting vote should consider whether deadlock may be an issue and take advice as to how best to provide for such a situation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.